Alameda on the rise

Squeezed by rising rents and an increasing East Bay space crunch, tenants from Berkeley, Emeryville and Oakland are discovering light at the other end of the Alameda Tunnel.

With vast tracts of bayfront property ripe for development and leasing rates 10 percent to 20 percent lower than those in the core of the East Bay market, Alameda has lured an impressive roster of businesses in the past two years. And East Bay brokers say they expect the trend will continue as rents jump even more in Berkeley and Catellus Development Group breaks ground on a new generation of buildings at Alameda Landing.

At Waterfront at Harbor Bay, developer SRM Associates sold four of five of its entitled phase one North Loop buildings. A 138,000-square-foot, $24 million roasting plant for Peets Coffee & Tea is close to completion. Cookie maker Donsuemor Madeleines has moved to a 32,000-square-foot building, and Santa Clara Systems is moving from Emeryville into a new 24,000-square-foot building at Harbor Bay. In addition, Bron Tapes recently signed a deal to move from Union City to the development.

SRM partner Joe Ernst said all of the buildings, built on a speculative basis, were sold before shell construction was finished.

"All of these went into escrow very quickly at good prices," said Ernst.

Phase two will consist of three smaller commercial condominiums between 6,000 and 8,000 square feet and three larger buildings with a total of 70,000 square feet.

"The Oakland metropolitan area has not seen any new product like this in 15 years," said Ernst. "The response has been incredible."

Business cycles

Flight to Alameda, as well as to Richmond, is a phenomenon that brokers have observed during past up cycles, according to Barry Cohn, a broker with NAI BT Commercial. Since 2005, vacancy rates in Alameda have dropped from 31 percent to 25 percent, and rents have risen from $21 to $24 per square foot a year. But that is still a deal compared with Berkeley, which has a 9.8 percent vacancy rate and rents hovering below $30.

"It's a story that repeats itself every cycle," Cohn said. "These companies love being in Berkeley and they would stay there forever. But there comes a time when there is no longer any room for them to grow."

The Berkeley-to-Alameda defection with the biggest impact will likely be Clif Bar's decision to move its headquarters to Alameda Landing, an 80-acre mixed-use project Catellus is building at the site of the former naval fleet and industrial supply center along the Oakland-Alameda Estuary. The 100,000-square-foot Clif Bar headquarters deal gives Catellus an anchor tenant for the development, which will include 400,000 square feet of office space, 300,000 square feet of retail, and 300 housing units.

Catellus will break ground on the Clif Bar complex in early spring and is aiming to complete it by August 2008.

"It's a very aggressive schedule," said Debbie Potter, Alameda's base reuse and community development manager.

In addition to the Clif Bar building, the first phase of Alameda Landing will include some retail, an enticement the city and the developer have used in marketing the property to potential office tenants.

"We're hearing a lot about the convenience factor, being able to offer employees a place to go to lunch and a health club where you can work out," said Potter.

A lot more coming

In a sense, Alameda Landing will serve as a pilot program for Alameda Point, the much larger reuse of the 700-acre former Alameda Naval Air Station. The city is conducting a community process to select a developer for the project, which is slated to include 1.6 million square feet of commercial, 1,800 housing units, and 149 acres of parks and open space. In September, Alameda Point Community Partners -- a consortium that included Shea and Centex Homes -- dropped the project, citing a "dramatic downturn in the real estate market." Four new partnerships have stepped in to vie for the project and are holding a series of community meetings.

In Clif Bar, Alameda planners see just the sort of crunchy, environmentally friendly, East Bay-grown light industrial company they believe is perfect for the community. The company's headquarters will be LEED platinum, the highest standard in the Leadership in Energy and Environmental Design green building rating system.

"We would love to appeal to other, like-minded companies attracted by Clif Bar," said Potter.

And with space becoming tight in Class A buildings on both sides of the bay, especially in San Francisco's tech-heavy SoMa, Alameda Landing is hoping to catch young tech companies priced out of trendier markets.

"We want to be able to capitalize on the tightening of the market and the growth of these well-capitalized, very successful companies," said Potter.

Richmond has also benefited from the high demand in the East Bay's core markets. Berkeley-based PowerLight Corp. recently announced plans to set up shop in a historic Ford Motor Co. assembly plant in Richmond, and online retailer Wine.com is also moving its warehouse from the former Oakland Army base to the old Ford plant.

Bruce Kern, executive director of the East Bay Economic Development Alliance, said Alameda and Richmond are well-positioned for more growth.

"It's the natural destination for companies that incubated in Berkeley and Oakland and want to keep their workforce," said Kern.

A temporary refuge

Alameda has also been an instrumental refuge for heavy container distribution companies that were booted out of the Oakland Army Base in July 2006, according to Drew Fischer, principal with Lee & Associates, an industrial brokerage.

Several of these companies, which warehouse and distribute goods coming through the Port of Oakland, have taken space at Alameda Landing, where Fischer just brokered a deal to move C-Trans into an 180,000-square-foot warehouse.

"None of the buildings were ideal for industrial, but they are close to the port, they are cheap, and some of these guys could make it work," said Fischer.

Heavy industrial warehouse space is in short supply, Fischer said. Over the past decade, the amount of warehouse space in Oakland has shrunk 15 percent as high-end housing developers have gobbled up more and more land. And with world-class bay views for office buildings and the prospect of more than 2,000 new housing units between Alameda Landing and Alameda Point, it's unlikely that Alameda would make sense as a longterm alternative for companies that "depend on fleets of 40-foot trucks coming and going."

"Alameda was the best solution, but it's a temporary solution," said Fischer. "Alameda's time is coming. They've got the views, the water. It's really cool real estate."